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Policy & Regulation

US FDIC is looking into deposit insurance for stablecoins

07 Oct 2021 : 10:28
2 min read
  • The FDIC, one of the main US banking regulators, is currently looking into whether certain stablecoins could be eligible for its coverage
  • The agency is trying to figure out what so-called pass-through FDIC insurance might look like for the reserves that stablecoin issuers hold at banks
  • The FDIC likely initiated this discussion because of the potential regulation of stablecoins

The Federal Deposit Insurance Corp. (FDIC), one of the main US banking regulators, is currently looking into whether certain stablecoins could be eligible for its coverage.

FDIC is studying several insurances

According to the sources, the agency is trying to figure out what so-called pass-through FDIC insurance might look like for the reserves that stablecoin issuers hold at banks. Such insurance would cover token holders against losses of up to $250,000 if the bank holding the collateral defaults.

The FDIC is also studying what regular direct deposit insurance might look like for banks that want to issue stablecoins, according to people familiar with the discussions.

Potential stablecoin regulations sparked discussion

The FDIC likely initiated this discussion because of the potential regulation of stablecoins. We previously reported that the Biden administration could subject stablecoin issuers to bank-like regulations. The issuer of USDC, the second-largest stablecoin, announced that the Securities and Exchange Commission (SEC) sent a subpoena to the company in July to investigate.

If the FDIC were to offer deposit insurance for stablecoins, it would only kick in if a bank that supplies a stablecoin issuer or issues a stablecoin itself is placed into receivership. Even in this scenario, it is rare for FDIC insurance to come into play, as the agency usually takes over the assets and deposits of a failed bank and sells them to a healthy bank.


About Author

Stan Colenbrander

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Stan is the head of news and podcast host at Cryptonary. He was formerly a member of the Cryptonary Pro community. In early 2021, he decided to drop out of journalism school at university to pursue journalism in real life and make an impact in the crypto space. . His areas of interest include the NFT industry, decentralised finance, and crypto start-ups.

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